Solar Installers Caught In Cross Fire Of Escalating China Trade War

Will the booming U.S. solar installation industry become collateral damage in the growing solar trade war with China?

On Thursday, the U.S. Commerce Department issued a preliminary decision levying steep tariffs against Chinese solar manufacturers, finding they illegally dumped cheap photovoltaic cells on the American market. But the companies that install those solar panels on residential and commercial rooftops – and which have benefited from a 75% plunge in photovoltaic prices in recent years – are split over the impact of the tariffs on their burgeoning business.

“I don’t think this ruling will stymie the industry,” says Danny Kennedy, president of Sungevity, an Oakland, Calif.-based residential solar installer that has rapidly expanded to the other states and countries over the past two years. “Lower cost affordable solar is the goal here and while this is unfortunate trade politicking I don’t think the sky is falling.”

Sungevity obtains panels from China’s Suntech and other suppliers. “It’s not a big proportion; it’s a mix,” Kennedy says of his Chinese supply chain. “This is a market where you have supply-demand imbalance and we’re confident that cost curve will continue to come down.”

Susan Wise, a spokeswoman for another big solar installer, San Francisco-based SunRun, was less optimistic. “If finalized, this decision would move us backward in the effort to make solar affordable for Americans,” Wise said in an e-mail. “It would make prices higher at the exact moment when solar power is starting to become competitive with fossil fuels in more markets.”

Like most U.S. solar installers, Silicon Valley’s SolarCity uses Chinese-made photovoltaic panels. “Artificial cost increases designed to help a handful of companies at the expense of thousands of others in all fifty states simply don't make sense,” Jonathan Bass, a SolarCity spokesman, said in an e-mail, noting his company employs 1,800 workers in a dozen states. “We make American-made panels available to any customer that prefers them.”

The solar trade war, which flared after the U.S. subsidiary of Germany’s SolarWorld filed an unfair trade complaint with the federal government, is far from over and a final decision is not expected until Nov. 23. SolarWorld and six other companies argued that the Chinese government unfairly subsidizes its domestic industry with cheap loans from state banks, favorable real estate deals and other incentives.

On Thursday, the Commerce Department hit Suntech, one of China’s biggest photovoltaic cell makers with a 31.22% tariff and found that Trina, Yingli and other Chinese manufacturers that have captured a significant share of the U.S. market should pay a 31.18% tariff. In 2011, Chinese companies exported $3.1 billion of solar cells to the U.S., according to the Commerce Department, which concluded that those manufacturers sold their products in the U.S. “for less than fair value.”

While SolarWorld and its allies hailed the tariffs as creating a more level playing field for the industry, some Chinese manufacturers characterized the Commerce Department as out of touch with the realities of the global solar market.

“As a global company with global supply chains and manufacturing facilities in three countries, including the United States, we are providing our U.S. customers with hundreds of megawatts of quality solar products that are not subject to these tariffs,” Andrew Beebe, Suntech’s San Francisco-based chief commercial officer, said in a statement Thursday.

Shayle Kann, vice president of research at GTM Research, says he expects other Chinese solar manufacturers to build factories overseas to avoid the tariffs.

“We think there will be some short-term disruption in the supply chain in the U.S. as installers figure out what they can and cannot procure, and as suppliers determine their strategies to deal with the tariffs,” Kann said an e-mail from China, where he is attending a solar trade show. “So while there may be a near-term impact on demand, we continue to anticipate substantial growth in the U.S. market this year and moving forward. We’re currently forecasting 75% installation growth in 2012, down from 109% in 2011.”